InvestMacro Forex News

By MoneyMorning.com.au

This is the worst we’ve seen the stock market in more than four years.

If you invest in shares, there’s only one word to describe you…you’re a lunatic.

If you’re not much keen on insults, don’t worry, we didn’t mean to insult you. It was a compliment. In fact, if you invest in shares today, you should embrace your lunacy.

Because thinking about things in a way that’s different from the rest of the crowd is the single best way to invest in shares.

Read on and we’ll explain what we mean…

The Aussie S&P/ASX 200 Index has taken a hammering over the past month, as the chart below shows:

Since the peak on 12 March the index has fallen 4.9%. That’s not such a big deal, seeing as stocks had rallied 25% between June last year and March this year.

But the not so funny thing is, while it was the dividend paying stocks that gained the most during that rally, it’s the growth stocks that are copping most of the slack as the market falls.

In other words, growth investors have got none of the gains and all of the losses. Not fair.

We’ve seen that with the stocks on our Australian Small-Cap Investigator buy list. Our biggest winners from the past six months are still sitting pretty, while the stocks that didn’t get the growth spurt have taken some of the biggest hits.

It’s a trend we’ve seen across the whole market

Not Game Enough to Ditch the Yield

That tells you something. It tells you that investors are still super nervous. It tells you that the interest rate play is still playing out.

For instance, Australian banking stocks have only dropped 2.9% since the 12 March high, compared to the broader index’s 4.9% drop.

This means that while investors may be cautious about the market, they’re not about to give up the 5%, 6% or 7% dividend yields that they’re currently getting from stocks.

After all, if they sell dividend stocks what will they do with the money? They’ll probably buy a fixed interest investment that’s only paying about 3–4%. That’s not a very attractive proposition from an income perspective. On an investment of $100,000 it could mean a difference of $4,000 per year.

As a result, investors are dropping the stocks that don’t pay a dividend — growth stocks. Even though those stocks were already trading at the best (cheapest) valuation they had been for more than four years.

But that’s the way markets can work. It now puts the broader market at the low end of what we expect to be a year of volatile sideways moves. That could put the growth stock rally on hold for another few weeks as investors look to snap up the dividend paying stocks that have given up a small part of their gains.

This brings us back to the point we made at the top of this newsletter — the lunacy of being a share investor.

With growth stocks seemingly going down the toilet, why on earth would you consider buying them now?

We’ll show you why now…

Dead Wood Out, Growth Stocks In

For the simple reason that the spread between Australian small-cap stocks (red line) and Australian blue-chips (blue line) is the largest since the creation of the S&P/ASX Emerging Companies index nearly three years ago:

A point will come (maybe today, next week, next month or in six months) when investors will want more than seemingly steady 4% or 5% gains from dividends. That’s especially so in the institutional sector where fund managers live or die based on their record compared to their peers.

A 5% return may cut it for three months, six months, or even a year…but not much longer than that.

That’s why at a time when only a lunatic would buy this market, we’re clearing out the dead wood and pouring all our resources into finding the Aussie growth stocks, trading at the cheapest valuations, that have the best chance of clocking up the biggest returns when investors shift from income to growth.

Cheers,
Kris
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From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: The Moment of Explosion

Money Morning: The Run-on Effect of Aussie Housing on the Australian Stock Market

Pursuit of Happiness: Why a PlayStation and Mining Technology Have More In Common Than You Think

Australian Small-Cap Investigator:
How to Make Money From Small-Cap Stocks

By MoneyMorning.com.au

A massive manufacturing technology convergence is in its early stages at this very moment. Exponentially expanding computing power, artificial intelligence, robotics and advanced sensing technology will change the way we make everything.

Since prehistory, we’ve been working at finding new ways to make things. We started out, over a million years ago, chipping away at lumps of flint or obsidian in order to make axes, knives or arrowheads. Obsidian was so important that some of the oldest trade routes sprang up around it, and it might even have been the earliest form of money.

From the Old to the New

We’ve since learned to work with all kinds of other materials. A tribesman 50,000 years ago may have banged a stone against a piece of flint to make a knife. Today, we might use a computer-controlled blanking press to punch a knife out of a sheet of steel, with a drill and a grinder to put holes in the tang and an edge on the blade. However, the basic way we fashion things hasn’t changed that much.

I still remember my first job as a teen, building medical device components in a machine shop. We often worked metals like platinum and gold — and carefully swept up the precious leftover chips after a job was completed. We still transform most of the things we make much as we did during the Stone Age: by removing stuff from a piece of material in order to create the physical shape we desire.

Despite the manufacturing advances of the Industrial Revolution, the way we make things is largely the subtractive process it has always been. We still saw, mill and grind. Then we take the shaped bits and assemble them with glues, screws, welds and rivets.

A pharaoh’s armorer or goldsmith could walk into a modern knife factory and be bewildered by the machines operating there — but the basic physical procedures used to create useful objects are essentially the same.

That’s changing fast, due to an emerging technology called 3-D printing.

3-D Printing and The Z-Axis Transformation

Unlike subtractive manufacturing processes, 3-D printing is additive. It doesn’t make things by taking something big and making something smaller out of it. It takes something small — a thin layer of plastic, metal or even human cells — and, by adding successive layers, builds something larger out of it.

The basic 3-D printing concept is similar to that used by the 2-D printer you probably have next to your computer. Your printer deposits a thin layer of coloured material on a page, with a precision of several hundred ink dots per inch. The pattern, whether text or picture, is described by a digital file you generate with your computer, which tells the printer precisely where on x- and y-axes to place the dots of ink.

3-D printing takes that idea and extends it in an additional axis — the z-axis. By printing layer upon layer of material, a 3-D object can be constructed. The result? We can produce complex shapes undreamed of using traditional tools.

Like a traditional 2-D printer, complexity doesn’t matter when it comes to 3-D printing. Your printer doesn’t care if it is printing a single solid colour on a page or a copy of an artistic masterpiece.

In the end, all it prints is a pattern of dots on a page described in a digital file. A 3-D printer essentially takes this one step further. It places many ‘pages’ on top of each other to build a 3-D shape. The additional complexity comes at little or no additional cost.

Furthermore, there is little or no waste. Unlike a subtractive process, which removes material, which must then be discarded or recycled, the only material used is what is needed to build an object.

3-D Printing’s Promise Becomes Reality

The technology is already transforming how we make things. 3-D-printed components are now making their way into everything from aircraft to rocket ships. General Electric, for example, recently purchased a small 3-D printing company to produce jet engine parts. NASA, on the other hand, is using 3-D printing to manufacture metal components for rocket engines where traditional manufacturing techniques don’t work.

According to Ken Cooper, advanced manufacturing team lead at NASA’s Marshall Center:

‘Basically, this machine takes metal powder and uses a high-energy laser to melt it in a designed pattern. The laser will layer the melted dust to fuse whatever part we need from the ground up, creating intricate designs. The process produces parts with complex geometries and precise mechanical properties from a 3-D computer-aided design.’

In addition, the process NASA is using reduces the manufacturing time by orders of magnitude, reduces cost and creates a stronger product.

3-D printing technology is even moving into the field of biotechnology. Innovators are developing bioprinters that can print cells like a common printer does with ink. The cells can be precisely placed to mimic the structure of a human organ.

The technology is currently beginning to see use in drug discovery and development. Unlike a cell culture, something that mimics the structure of an organ is likely to be a better test subject for a new compound. With sufficient refinement, this technology in the future could even be used to print entire organs, which would put an end to organ transplant waiting lists.

However, while this technology is still in the future, 3-D printing is making a dent in the biomedical field right now in other ways. It is, for example, replacing traditional methods for manufacturing dental implants.

With a 3-D printer, you could have a new custom crown made while you wait at the dentist’s office. Recently, a 3-D printing company received FDA approval for printed bone replacement implants. One patient had 75% of his skull replaced with a 3-D printed prosthetic. The technology is also being used for joint replacements.

3-D printing introduces an element of flexibility to the way we make stuff. Typical mass production techniques require a heavy investment in tooling, but the flexibility to change the end product isn’t always there.

With 3-D printing, all that needs to be changed is a digital file using computer-aided design software. That kind of flexibility is proving to be a huge boon to engineers, who can design a prototype on a computer and rapidly print out a copy.

This flexibility means that truly customized things are becoming a reality. 3-D printing allows anyone with a computer and an Internet connection to design, manufacture and distribute a product, without the need for an expensive factory.

Websites have popped up that allow customers to transmit a 3-D design file, which can then be printed for a fee. Users are making everything from custom smartphone cases to jewelry — and with consumer-level printers, they can now begin to do some of it at home.

Ray Blanco
Contributing Editor, Money Morning
 

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From the Archives…

Why Dividend Stocks May Not Stay This Cheap for Long

29-03-2013 – Kris Sayce

Respect the Market Trend, but Don’t Expect it to Last

28-03-2013 – Murray Dawes

Silver ‘$100 Within Two Years’

27-03-2013 – Dr. Alex Cowie

11 Billion Reasons to Expect a 200% Move in Gold Stocks Within Months

26-03-2013 – Dr. Alex Cowie

You Want Proof the Stock Market’s Heading Up? Try This…

25-03-2013 – Kris Sayce

By MoneyMorning.com.au

The market is used to being disappointed by Japan.

Investors were clearly holding their breath as the new central bank chief, Haruhiko Kuroda, prepared to announce his big plans for jump-starting Japan’s market out of deflation.

For once, they needn’t have worried.

After Kuroda revealed the central bank’s latest decisions, the Nikkei 225 rocketed and the Japanese yen tumbled against the US dollar.

Clearly, it worked.

And the good news for investors in Japan is that this could be the final push needed to convince the wider market that this time, Japan really is on the comeback trail…

The Bank of Japan Proves Itself

So what did Bank of Japan boss Kuroda — already being described as ‘Japan’s Ben Bernanke’ — do?

The Japanese have been fiddling with monetary policy for so long that it’s hard to keep on top of all the bells and whistles in their system. The short answer is that Kuroda promised to ‘do what it takes’ to drive Japanese inflation up to 2%.

In itself, that was enough to get investors excited. Prime Minister Shinzo Abe had showed signs earlier this week of rowing back from the idea that the 2% target was readily achievable.

As for how it’s going to do it: well, firstly, the Bank of Japan will buy ¥7trn worth of bonds each month. That’s double what it currently buys, and a far bigger jump than the market had expected. In other words, it’ll do more quantitative easing (QE) than the market had thought.

Secondly, it has changed what it’s buying. On the bond side, it will be buying longer-dated government bonds (up to 40-year maturities). So long-term interest rates will be squeezed lower.

On top of that, it’s also going to increase its purchases of even riskier assets such as exchange-traded funds and real estate investment trusts. So it won’t just be using QE to buy government bonds. It’s also printing money to buy equities, albeit in relatively small amounts. (This sounds extreme but believe it or not, the BoJ has been doing this for a while.)

Thirdly, the BoJ has suspended its ‘banknote rule’. This was a sort of speed limit on QE. It prevented the BoJ from buying more bonds than there were bank notes in circulation. Apart from anything else, this shows the BoJ is serious.

As if all this wasn’t enough, Kuroda had the backing of almost the entire BoJ board. So there’s very little to stop him getting even more radical.

Why is This Different from What Ben Bernanke is Doing?

The point of all this is to get the Japanese economy moving again. In nominal terms (ie, without taking deflation into account), the Japanese economy is no bigger than it was in 1992, notes Peter Tasker in the Financial Times.

Meanwhile, the strong yen has been punishing Japan’s crucial export industries. Weakening the yen will boost exports. And encouraging nominal growth (even that driven by inflation) will help to improve the country’s debt-to-GDP ratio.

One reader raised a very good point the last time I wrote about this: how is this any different to what Federal Reserve chief Ben Bernanke is doing in the US?

The answer is: it’s not. And as far as I’m concerned, the jury’s still out on how much good QE actually does for the real economy. You can easily make the case that the (very fragile) US recovery is down to its more aggressive treatment of the banks, the fact that its housing market crashed, and the fact that it can exploit shale oil and gas.

But there’s one thing that QE does seem to do: and that’s boost asset prices. And with every other major nation in the world trying to trash or defend its currency, Japan can’t stand by any longer and let itself be the one that carries the fall-out.

What I also like about Japan is that even after the Nikkei 225 has risen by more than 40%, there’s still a lot of scepticism about the market. Investors clearly expected the BoJ to disappoint them. This may be the trigger that the sceptics need to convince them to join the party.

John Stepek
Contributing Editor, Money Morning

Join Money Morning on Google+

Publisher’s Note: This article originally appeared in Money Week

From the Archives…

Why Dividend Stocks May Not Stay This Cheap for Long
29-03-2013 – Kris Sayce

Respect the Market Trend, but Don’t Expect it to Last
28-03-2013 – Murray Dawes

Silver ‘$100 Within Two Years’
27-03-2013 – Dr. Alex Cowie

11 Billion Reasons to Expect a 200% Move in Gold Stocks Within Months
26-03-2013 – Dr. Alex Cowie

You Want Proof the Stock Market’s Heading Up? Try This…
25-03-2013 – Kris Sayce

By The Sizemore Letter

Charles Sizemore, CFA, talks with Jeff Reeves of InvestorPlace.com about auto stocks and whether GM ($GM), Ford ($F) and Daimler (DDAIF) have anything to offer in 2013.

Daimler is Charles Sizemore’s pick in InvestorPlace’s Best Stocks of 2013 contest.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post VIDEO: Are Automakers a Buy in 2013? appeared first on Sizemore Insights.

By The Sizemore Letter

Is Spain a buy?  In a word, “Sí.”  But perhaps a better reply would be “Depende.”

After the recent volatility stemming from the Cyprus bailout, Spanish stocks are more attractive than at any other time in 2013.    But you shouldn’t buy just anything trading in Madrid.  A little selectiveness is warranted.

To start, if a company depends heavily on the local Spanish market, it’s probably best avoided.  Last week, Spain’s central bank announced that the Spanish economy remains in siesta mode.  By Bank of Spain estimates, the economy will contract by 1.5% , about on par with last year’s decline.  The Spanish government had been budgeting a smaller decline, around 0.5%, so the news was not taken well by investors who already have enough to worry about in Europe’s periphery.  Making it worse, unemployment was expected to creep up another percentage point to 27%.  That’s over three times the (high) American unemployment rate.  Ouch.

The good news is that most of the Spanish stocks that have the greatest exposure to the Spanish economy are not ones that you were likely to consider buying anyway.  Most trade in the U.S. only as over-the-counter ADRs and don’t have much in the way of trading volume.  The Spanish stocks you are most familiar with—such as telecom powerhouse Telefónica (NYSE:$TEF), megabanks Banco Santander (NYSE:$SAN) and Banco Bilbao Vizcaya Argentaria (NYSE:$BBVA) and retail fashion giant Inditex (OTC:IDEXY), parent company of the Zara chain—are companies with a truly global footprint that get the bulk of their earnings from outside Spain.

These four companies, along with Spanish oil major Repsol  (OTC: REPYY), represent nearly 55% of the holdings of the iShares MSCI Spain Index ETF (NYSE:$EWP), the vehicle that most American investors would use to get exposure to the Spanish market.

Suffice it to say, the Spain ETF is not particularly well diversified.  This is not necessarily a bad thing, if you are bullish on the largest holdings, as I am.  But it is certainly something to keep in mind.

You really have to look to find Spanish companies for which the domestic market matters all that much.  Electric utility Iberdrola (OTC:IBDRY), the sixth largest holding of EWP,  is a case in point.  This sleepy power company gets 70% of its profits from outside Spain.  Construction and infrastructure company Ferrovial (OTC:FRRVY), the eighth largest, is even more international, getting a staggering 85% of its profits from outside Spain.

And Amadeus IT (OTC:AMADY), the seventh largest, is hardly a Spanish company at all.  Amadeus provides software and IT solutions to the world’s travel industry and, other than its Madrid address, has little to mark it as distinctly Spanish.

So what are a few companies best avoided?

I would start with the local banks.  The recent Cyprus bailout, in which large deposit holders effectively had their accounts seized to pay back international lenders, has investors worried that something similar could happen in Spain.  This would not affect the large international banks like Santander and BBVA, both of which are healthy.  But the banks that cater more to the domestic market—such as Bankia (OTC: BNKXF), Banco Popular Espanol (OTC:BPESY), CaixaBank (OTC:CAIXY) and Banco Espanol de Credito (OTC:BNSTY)—are stocks that I would steer clear of for now.

If investor risk appetites return to Spain, these are precisely the stocks that will rally the hardest.  But for most investors, I would recommend sticking with the large multinationals that get most of their profits from outside Spain.  Here I see the best risk/return tradeoff for the remainder of 2013.

Disclosures: Sizemore Capital is long SAN, BBVA, and TEF.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post Is Spain a Buy? Depende. appeared first on Sizemore Insights.

By www.CentralBankNews.info

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 4 Apr, 08:50 EST

The PRICE of GOLD extended its worst two-day drop vs. the Dollar since June last year
Thursday morning in London, falling as low as $1540.50 per ounce before rallying to $1551.

Commodities also stemmed their fall and major government bonds trimmed earlier gains.

European stock markets were mixed, but Japanese shares leapt 2.2% on the day after the
central bank in Tokyo vowed “to use every means available” to reverse the country’s two-
decade economic depression and price deflation.

Spending more than $1.4 trillion in newly-created money over the next 2 years, the Bank of
Japan’s fresh quantitative easing will see it buy listed equities and real-estate trust funds as
well Japanese government bonds.

On the news the Yen fell nearly 3% versus the Dollar. That only unwound the last 36 hours
of falling gold prices, however, which rose back to ¥4750 per gram – a new three-decade
high when first hit at the start of this year.

“Stop loss orders were triggered [Wednesday] when the gold price fell through key support
levels,” says a note from German bank and bullion retailer Commerzbank.

“We believe the next wave will be another corrective wave [with] a target as low as $1308,”
says Russell Browne at bullion-bank Scotia Mocatta, pointing to Elliott Wave analysis.

“However, gold has to first break through big support level in $1522 to $1535 level, the lows
from 2011 and 2012.”

“We have to think that the gold sell likely has some roots in heavy fund liquidation,” says
comment from brokers INTL FCStone, adding “Our guess is that the lone holdout – John
Paulson – may finally be throwing in the towel and perhaps paring some of his massive
positions.”

The giant US-listed SPDR Gold Trust ETF shed a further 2.7 tonnes on Wednesday after
losing more than 8 tonnes Tuesday according to Reuters data.

Now holding 1206 tonnes of gold bullion to back its shares – more than 10% less than the all-
time peak of late-November last year – the trust was 5% owned by Paulson & Co. as part of
its flagship, gold-denominated hedge funds.

The quantity of bullion held for silver ETF trust funds was unchanged Wednesday according
to Bloomberg. But silver prices also extended their drop for the week to 5.6% on Thursday
morning with a new 8-month low versus the Dollar beneath $26.80 per ounce.

“Silver broke the four-year trend line now at $29.80 and corrected lower,” says a note from
bullion market-making bank Societe Generale, “and is nearing the multi-year lows at 26.40/
26.05.

“This zone is made up of the lows since 2011.”

SocGen earlier this week issued a report declaring “the end of the gold era” for the last
decade’s bull market, citing expectations of higher interest rates from the US Federal Reserve.

“Things still have a way to go before we can say we’ve fully recovered from the worst
financial crisis and recession since the 1930s,” John C.Williams of the San Fran Fed told an
audience in Los Angeles on Wednesday.

A day after Dennis Lockhart, president of the Atlanta Federal Reserve Bank, said the US
Fed’s $40 billion per month asset purchases “continue to be justified”, Williams said he
expects the unemployment rate “to edge down to a little below 7% by late 2014 and fall
below 6.5% in the middle of 2015.”

Six-point-five is the jobless level at which the Fed would consider tightening its ultra-
accommodative policies, according to its recent policy statements. Williams is not a voting
member of the Fed’s main committee until 2015.

Today both the Bank of England and the European Central Bank meantime kept their key
interest rates on hold yet again, offering overnight money to commercial banks at a record-
low 0.50% and 0.75% respectively.

The gold price in Euros today hit its lowest level in four weeks at €1200 per ounce – a record
high when first reached on the way up in August 2011.

UK savers and investors saw gold priced in Sterling make a new 2013 low at £1020 per
ounce.

Adrian Ash
BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market
for private investors online, where you can buy gold and silver in Zurich, Switzerland for just
0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best
place for your money, and any decision you make will put your money at risk. Information
or data included here may have already been overtaken by events – and must be verified
elsewhere – should you choose to act on it.

By www.CentralBankNews.info
    The European Central Bank (ECB) kept its benchmark refinancing rate steady at 0.75 percent, as expected, and said it’s president, Mario Draghi, would comment on the governing council’s decision at a press conference later today.
    The inflation rate in the 17-nation euro zone fell to 1.7 percent in March from February’s 1.8 percent, further under the ECB’s target of inflation that is below, but close to 2 percent.
    Although most economists had expected the ECB to keep rates steady, a growing number are expecting the bank to signal that it may ease policy later this year if the economy remains weak.
    The euro zone’s Gross Domestic Product contracted by 0.6 percent in the fourth quarter of 2012, the fifth quarterly contraction in a row, for an annual drop of 0.9 percent, wider than the 0.6 percent decline in the third quarter.
    The jobless rate in the 17 nation area was unchanged at 12.0 percent in February with rates in Greece and Spain above 50 percent.
    Last month the OECD said there was a strong case for the ECB to ease its policy given weak demand and inflation that is below its objective.

    “The risk of undue inflationary pressure associated with monetary easing is small, as the transmission mechanism is impaired, especially in the periphery countries where banks face high funding costs,” the OECD said in its interim economic report.

        www.CentralBankNews.info

By www.CentralBankNews.info
    The Bank of England (BOE) maintained the official Bank Rate at 0.5 percent and its target for asset purchases at 375 billion pounds, as widely expected.
    In the BOE’s March and February meetings, Governor Mervyn King and two other members of the nine-member Monetary Policy Committee were defeated in their attempts to expand the bank’s asset purchase program, first launched in March 2009, by 25 billion pounds.
    It was the first meeting by the BOE’s policy-making committee since the UK Chancellor last month expanded the bank’s remit, giving it more flexibility and leeway to use “monetary activism”- to borrow George Osborne’s phrase – and deploy new unconventional policy instruments to stimulate growth as long as inflation is trending toward the bank’s 2 percent target.
    The BOE acknowledged in February that inflation had remained “stubbornly above” its target and was likely to rise further and remain above the target for the next two years due to higher regulated and administered prices and the decline in sterling’s exchange rate.

    In February the UK inflation rate rose to 2.8 in February from  2.7 percent in the preceding four months. The last time it was below 2 percent was in December 2009.
    This morning sterling was trading around 1.51 to the U.S. dollar, above its a 2-1/2 year low of $1.4830 in mid-March, but down some 8 percent since January.
    The UK’s Gross Domestic Product contracted by 0.3 percent in the fourth quarter from the third for an annual growth rate of 0.2 percent, down from 0.4 percent, flirting with the risk of a third recession since the global financial crises.
    The BOE has held its bank rate steady since March 2009.
    In addition to giving the BOE more flexibility to act when inflation is above its 2 percent target, which Osborne confirmed, the BOE was given freedom to start using forward guide to give markets a better idea of its future rate path. 
    Osborne also said the BOE could link this policy guidance to specific thresholds, for example unemployment as now used by the Federal Reserve. The BOE will give an assessment of the use of such thresholds in August, the month after Mark Carney, currently governor of the Bank of Canada, takes over from King.


     www.CentralBankNews.info

By www.CentralBankNews.info Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.